Europe
Anyone looking for a busy day on Europe’s markets would probably have been better off doing a bit of on-line shopping because trading activity has been somewhat muted, with US markets only opening for half a day, but still continuing to set new records.
The divergence between US markets and the rest of Europe continues to widen, with the risks to Europe’s markets being no better illustrated by this morning’s news that Italian bank Monte dei Paschi saw shareholders approve the latest plans to raise €5bn of extra share capital. Having seen the bank get bailed out on three previous occasions, shareholders will no doubt be hoping that this will mark the low point for share dilution, as the bank looks to find its way out of the crushing burden of its non-performing loan book.
Italian finance minister Padoan was at pains to reassure investors that his recapitalisation would work, which is never a good omen. The fact that he needed to say it is a warning all by itself to steer well clear. Markets would seem to agree driving the share price sharply lower.
Given the lack of interest the DAX, CAC40 and FTSE MIB have found it difficult to move much away from the flat line, which more or less sums up a weekly performance, that has only been marginally positive.
Healthcare stocks have led the gainers today in the UK with AstraZeneca (LON:AZN) the best performer after an upgrade from Liberum on the basis that the share price has fallen too far from its summer peaks.
Lloyds Banking Group (LON:LLOY) and Royal Bank of Scotland (LON:RBS) have slipped back today ahead of next week’s Bank of England annual stress tests on the UK banking sector.
The oil and gas sector has also slid back on a weaker oil price.
US
US markets opened a holiday shortened session at new record highs with retailer’s front and centre as the Black Friday sales get under way in earnest in the US, on what is traditionally one of the busiest shopping weekends of the year.
The Russell 2000 in particular continues to break records opening at a new record high and looking to post its 15th successive positive day in succession
US retailer Target (NYSE:TGT) reported that it had seen its biggest day ever as US consumers took advantage of a host of deals, both on line and in store, with TV’s in particular selling well. It would appear that the purse strings are being loosened with a vengeance as US consumers round off a weak year for retail sales with a strong end to the year.
In M&A news, US health care giant Johnson & Johnson (NYSE:JNJ) is reported to be in talks with Swiss biotech company Actelion (LON:ATLNCHF) about a possible acquisition.
The US trade balance for October showed a $62bn deficit as imports rose sharply while exports showed a sharp drop, no doubt as a result of the strong US dollar, making US exports dearer, and imports cheaper.
FX
The pound has had a decent week overall, only losing ground against the Australian dollar, though it has slipped back across the board today. Economic data has continued to come in on the positive side this week. An improvement in Q3 business investment of 0.9% when a fall was predicted is a welcome indication that businesses don’t appear to have been affected by the surprise decision to leave the EU.
The latest CBI retail sales in November also showed a surprise improvement on the October numbers growing at their fastest pace this year, a trend that has been put down to the recent cold weather boosting clothing sales. If personal experience this week is anything to go by cold remedies are also likely to have done a roaring trade as well.
This pickup in retail sales could well be as a result of consumers getting ahead of any new year price rises as inflation starts to kick in at the beginning of 2017.
The US dollar index appears to be showing some signs of topping out sliding back across the board, though it is holding up against the pound.
Commodities
Crude oil prices look to be ending a positive week on a weak note ahead of next week’s OPEC meeting in Vienna. There appears to be some scepticism setting in that we’ll see any meaningful deal come out of next week, with the positions of Iran and Russia likely to be particular sticking points.
The news that Saudi Arabia won’t be sending a delegate to a technical meeting on quotas which is due on Monday, just prior to Wednesday’s meeting in Vienna hasn’t helped, raising the prospect that we won’t see a deal at all next week.
iron ore and copper prices have seen decent gains this week with iron ore back new two year highs while copper prices have also rebounded strongly, back close to the highs seen earlier this month.
It’s not been such a good week for gold prices, which have slipped to levels last seen in February and to their third successive weekly decline, though they still remain up over 10% year to date.
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